3 Deals Signal a Changing M&A Landscape in Procurement Technology and Solutions (Part 1: Coupa-ConnXus)

Despite coronavirus lockdown measures, the past couple of weeks have seen a flurry of deal announcements in the procurement technology and solutions world (which represent the M&A “re-start” of about a dozen material transactions that you’ll be hearing about for the rest of the year).

Deal activity is not just financial engineering. It is form following function. And form in this case is the fact that procurement technology and solutions are still going strong in most cases inside companies and government. In other words, they’re still buying stuff, at least in many cases.

The reason procurement technology and solutions, even in the economic uncertainty maelstrom of COVID-19, are still hot compared with other sectors is simple: No other set of capabilities or tech can be tied so directly to cost reduction/takeout, risk mitigation, working capital improvement and process efficiency/automation (yeah, we know what that can sometimes be code for, but unfortunately it’s true — as labor economists would agree).

In short, even in the current mess, companies and the public sector are still active consumers of procurement technology and solutions. And on the transaction side, deals aren’t slowing down entirely either, even if the debt markets are still a challenge. Moreover, valuations aren’t taking the same hit as in other sectors (either in the private deals we’re seeing or in the capital markets). Coupa’s stock, in fact, just hit an all-time high last week, valuing the company at nearly $13 billion, putting the firm at over 30X revenue on a trailing basis. That’s HUGE.

Still, there’s changes afoot from a deal perspective. And I believe three recent transactions collectively suggest precisely how the M&A landscape is changing.

In this three-part Spend Matters Nexus analysis, I will share my own perspective on the shifts, both from a corporate development lens (what I used to do) and a private equity lens (the practice I lead today for Azul Partners).

Some of these shifts are subtle, others not so much. But one thing is coming into sharp focus for me: More folks are going to miss out on opportunities if they fail to put the right pieces on the chessboard soon.

Deals covered in this series are Coupa-ConnXus, Apttus-Conga, and Bregal Sagemount’s recent $80 million investment in Corcentric.

For each, here are the questions I’ll answer:

• What is the summary of the transaction?
• What is the “gotcha” of the deal (for me)?
• What additional factors make the transaction interesting?
• What does it signal for tomorrow (why is it an important signpost for the road ahead)?
• What are the competitive/market implications for sponsors and strategic buyers?
• What other (related) providers are interesting to look at in the same or similar markets?

For this installment, let’s look at the Coupa-ConnXus deal.

Jason Busch is Managing Partner of Azul Partners’ Investor Advisory Group. He works with sponsors, CEOs and boards on data-driven due diligence, M&A and strategy. Jason is also the lead author of Spend Matters Nexus, a private newsletter and subscription service.